M V. Ramoji Rao is a seasoned dentist and a busy one too. It’s not easy to serve as the principal of a dental college while also managing a 20-acre farm in the fertile Krishna district of Andhra Pradesh. So, a decade ago, when Rao was introduced to oil palm—a perennial plantation crop that can be managed remotely—he took the plunge. It turned out to be a wise decision financially.
As edible oil prices touched record highs this year, Rao earned his fair share, close to ₹10 lakh in net profits, something he could never fetch through paddy—the crop he used to grow earlier.
But that’s only half the story. About three years ago, many farmers in Rao’s district had uprooted their plantations when the price of fresh fruit bunches of oil palm hovered around ₹8,000 a tonne—less than half of the current market price.
Oil palm is a low maintenance and high yield crop. But it’s also a water guzzler and needs more than 300 litres of water per tree per day. That’s the reason why it is grown mostly in Malaysia and Indonesia, where it rains throughout the year. However, in Andhra Pradesh, the state with the most oil palm plantations in India, the crop is largely irrigated with groundwater drawn from borewells.
The jury is still out on whether refined palm oil is healthy or not (in comparison to other oils) but one aspect is amply clear: its abundance on the plates of Indian consumers. Cheap palm oil, nearly all of it imported, accounts for over a third of India’s edible oil consumption; overall, India imports 60% of its requirements. This lack of “self-sufficiency" is a key reason for the soaring cooking oil prices, since home grown mustard and groundnut oils have a limited footprint and, as a result, have moved in sync with the market-dominant palm oil’s international prices.
On an average, retail prices were up 33% in July compared to last year, the highest among all food commodities. And it matters because edible oil is comparable to other essential food items such as onions and pulses—used widely by a majority of Indians and, by extension, a political lightning rod.
According to Suresh Nagpal, chairman of the Central Organisation for Oil Industry and Trade, the current international price of crude palm and soy oil is nearly double the level prevalent in 2019. The underlying causes are many: lower production due to pandemic-induced labour shortages in Indonesia and Malaysia, significantly higher demand from China, and the diversion of soy oil for the production of bio-diesel in the US.
Responding to the crisis, the Union government launched a ₹11,000 crore national mission on oil palm in August. The policy is a mix of price assurance and planting assistance to farmers, with a focus on the north-eastern states and the Andaman and Nicobar Islands, both of which get abundant rainfall. But the mission seems to have missed the woods for the trees. India is targeting to add about 2.5 million tonnes (mt) of home grown crude palm oil by 2030. That’s not only a decade-long gestation, but once the growth in consumption is accounted for, India will continue to depend heavily on imported oils even if the target is met.
The policy also completely ignores oils that are already native to India, such as mustard, groundnut, sesame and coconut, which are healthier and grown mostly by resource-poor farmers in rain-fed conditions. In fact, in the early 1990s, India had achieved self-sufficiency in edible oils by focusing solely on indigenous oils. That changed after cheaper imports began to flood the market, discouraging farmers who used to plant indigenous oilseeds.
From 1986—when India launched its first technology mission in oilseeds—till about 1994—when it joined the World Trade Organisation (WTO)—it had significantly raised the cropped area under oilseeds. The production of native oils doubled. Strangely, the country is now betting on a crop with a long gestation period of 4-5 years without even having enough of what the crop needs the most: water.
A divided house
India’s current thrust to promote oil palm is seemingly driven by its prime advantage: productivity. Fresh fruit bunches of palm yield at least five times more oil per unit of land compared to other oilseeds, said Sanjay Goenka, president of the Oil Palm Developers and Processor’s Association, an industry lobby that has Godrej Agrovet Ltd and Ruchi Soya Industries Ltd as its members.
Goenka added that the “misinformation" regarding palm oil being unhealthy is deliberate, as its global dominance has eroded the western hegemony in soybean and sunflower. For the new policy to succeed, states have to do their bit by respecting “zonalisation norms", Goenka said. For instance, to cater to 50,000 hectares of plantation, a company has to invest about ₹2,000 crore (this includes the cost of saplings and handholding support for farmers). Since a firm can start recouping its investments and make profits only by the tenth year, farmers will have to mandatorily supply to the company that is operating in a particular zone and vice versa.
Oil refiners, however, are sceptical of any substantive change. “Palm is a long gestation crop and it would have been in (the) fitness of things for other high oil-bearing oilseeds to have been given due policy support," wrote Atul Chaturvedi, president of the Solvent Extractors’ Association in the August issue of the industry newsletter.
Chaturvedi added that India’s consumption and import dependence would keep growing in the intervening decade and the palm project is likely to be a drop in the ocean. “We fervently hope (that) the long-delayed and debated National Mission on other oilseeds like mustard, groundnut, soya, rice bran, etc. is announced on (an) immediate basis if we (are to) have any hope of achieving a semblance of atmanirbharta (self-sufficiency) in edible oils."
States such as Andhra Pradesh and Telangana mindlessly promoted paddy and cotton once, and now want to switch to palm oil, says G. V. Ramanjaneyulu, executive director at the Hyderabad-based Centre for Sustainable Agriculture. “Oil palm can be grown sustainably if the focus is on optimum and not maximum productivity. What purpose will it serve if (the) plantations use up available groundwater in (just) a decade or two?" Ramanjaneyulu asked. He added that the next likely demand from industry lobbies would be a relaxation in land ceiling regulations, which would then allow for large plantations that could potentially suck entire regions dry.
Besides, the crop is suited for rich, large land-owning farmers—and absentee landlords who can wait it out for 5 years before making profits. A strategy to achieve self-sufficiency based on palm, therefore, excludes existing small and marginal oilseed growers. Moreover, it reduces the responsiveness of farmers to changing market demand. For instance, due to the rising prices, farmers can plant more mustard and groundnut this year, but not palm due to its long gestation period.
Compared to the 15mt of edible oils imported into India, domestic production hovers between 10-11mt every year. Over half of the home grown production is contributed by mustard, groundnut and soybean.
According to some experts, India could achieve stability in prices with a mix of strategies, which includes improved research and development (R&D) to increase the yield and oil content in mustard and groundnut. In addition, farmers will need a degree of duty protection from cheap imports alongside cultivation incentives and price support—or better still, a mix of both. Another possible solution is to nudge and incentivize farmers to move away from rice, wheat and sugarcane—crops that garner the most amount of price support currently leading to a perennial glut—and instead, plant more oilseeds and pulses where India is deficient.
“If palm oil is not environment-friendly and we want to stop purchasing from Malaysia for that reason, it does not make sense for us to promote it in the north-east," said T. Nanda Kumar, a former agriculture secretary. “The challenge is: Can we get more oil content from mustard and groundnut by pursuing improved varieties? Another oil source is rice bran, which is healthy and holds great potential."
Kumar added that it will be politically difficult to raise duties on palm oil imports as it will add to inflation. A way out is to impose quantitative restrictions and channelize imports via the public distribution system to stabilize consumer prices, especially for the poorer households.
For now, the prevailing price of oilseeds such as mustard will push farmers to bring more area under cultivation. “Wholesale mustard prices have more than doubled compared to last year and farmers in my area will replace some area under chickpeas, wheat and barley with mustard during the winter crop season (beginning October)," said Harman Brar, a farmer from Sri Ganganagar in Rajasthan.
‘Scoundrels’ of history
How India achieved atmanirbharta in the early 1990s could still serve as a prescient lesson from history. Few know that the late Verghese Kurien of Amul milk fame played a critical role by launching the Dhara brand when he was the chairman of the National Dairy Development Board (NDDB). Kurien ensured that mustard growers were paid a profitable price while ensuring price stability for consumers. Dhara was a runaway success and became the leading edible oil brand within a few years.
“The oil lobbies of other countries were unhappy (since imports fell by 90% by 1993)… we took care of the telia rajahs (big oil traders) but we did pay a heavy price," wrote Kurien in his autobiography ‘I too had a dream’. Many NDDB officials were physically assaulted and its cooperative oil mill in Bhavnagar, Gujarat, was repeatedly set on fire. “The scoundrels, who for decades exploited both farmers and consumers, were waiting eagerly for our edible oil project to fail," Kurien wrote.
The brief window of self-sufficiency continued until India signed the WTO agreement in 1994 and edible oil imports were allowed by the Narasimha Rao-led government. By 1998, imports had climbed to account for 30% of consumption. According to B.M. Vyas, a former managing director of Amul who also played a key role in launching Dhara, “Under the (Atal Bihari) Vajpayee government, the import duty on edible oil was further reduced to 15% in July 1998, and coincidentally, the argemone adulteration dropsy case took place in August 1998." More than sixty people died and thousands reported sick in Delhi. There was a clampdown on local ghanis and a ban was imposed on the sale of loose oil.
Some believe it was a deliberate ploy to sabotage India’s local success story in oils. The episode led to a permanent shift in consumer preference towards colourless and odourless solvent extracted refined oils, which are ripped of the nutritional properties of oilseeds. Over the next few years, that black swan event in the late 90s led to a shift in the cooking and consumption pattern, Vyas wrote in a 2020 essay for The Wire.
Cut to the present, home grown cold-pressed or expeller-pressed oils, which are extracted at low temperatures in order to retain the nutritional qualities, are retailing at over ₹250 a litre—unaffordable for most consumers who are pushed to purchase cheaper refined and blended oils.
According to Veena Shatrugna, a former deputy director at the National Institute of Nutrition, excess consumption of palm oil is as good or bad as the excess intake of any other oil but ideally, one should consume a mix of different edible oils. “Cold-pressed oils are healthier than solvent extracted ones, provided they are not adulterated," Shatrugna said, while adding that “consumption should be limited to 30-50 grams of oil per adult per day… that’s nutrition, the rest is politics."
Palm oil is now widely used for blending and adulterating refined oils and is omnipresent in packaged and processed food—from biscuits and chocolates to potato chips and instant noodles. To add to this mix, India is also consuming copious amounts of genetically modified soy oil which is imported from countries such as Argentina and Brazil.
Together, imported palm and soy oil (12mt) account for close to half of India’s annual edible oil consumption, damaging the future prospects of home grown oilseeds.
In his book, Kurien recounts the words of his detractors who had warned, “Unlike milk, oil was a very slippery business and Kurien was bound to slip and fall flat on his face." As it turns out, it wasn’t Kurien but Indian consumers who are paying dearly
